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UK Fintech boards lack AI skills and diversity

New report from EY and Innovate Finance shows UK fintech firm boards are drivers of sustainable growth, but lack essential skills and risk group think due to a lack of diversity

  • Editorial Team
  • April 16, 2024
  • 5 minutes

The UK’s FinTech boards play a vital leadership role in driving long-term growth and innovation, according to a new report by EY and Innovate Finance.
Titled Setting the pace or keeping up – are FinTech boards future-fit?, the report shows many are missing skills and experience perceived as crucial and boardroom gender diversity continues to challenge.

The report comprises market research, roundtable interviews with over 40 FinTech CEOs and Chairs, and a pulse survey conducted with 38 executive and non-executive directors of FinTech firms.

Gaps in AI and fundraising skills at board level require attention

The findings identify a skills gap within FinTechs, with almost half of survey respondents (47%) claiming their board does not have the requisite level of GenAI expertise.

In addition, only 42% believe their board has the necessary skills in fundraising, of which 30% say this is the biggest single gap on their board. However, to help address this, 34% of respondents are in the process of hiring new talent and 21% are engaged in upskilling and training current board members.

Gender diversity on UK FinTech boards is lagging

The research also finds that the UK’s top 50 FinTechs currently record just 22% female representation on average at board level, falling below the FCA’s minimum 40% female board representation and could hold back future growth.

In addition, 37% of those surveyed have no women sitting on their boards, and just 3% report an equal or better ratio of female to male board members at present.

“The core focus of UK FinTechs is often on achieving short-term growth and rapid innovation as they grow and scale. However, CEOs of UK FinTechs emphatically told us that long-term advice and strategic guidance from their boards – underpinned by diverse skills, perspectives and ideas – is vital to the ultimate success of their firms,” says Anita Kimber, UK Partner and FinTech Policy and Ecosystem Leader at EY.

“While the nature, role and construct of boards naturally evolve over the life cycle of a FinTech, in all phases of growth, board members are most effective if they collectively hold a diverse and deep understanding of customer needs and market dynamics.

Kimber notes this also helps as they advise and support the CEO to drive organisational purpose, deliver financial results, achieve good customer outcomes and meet regulatory standards.

“Our research finds without doubt that boards are key to UK FinTechs achieving scalable and sustainable growth, and going one step further, that diversity of gender, skills and backgrounds can represent the difference between success and unrealised potential,” she says.

“The UK is home to a world-leading FinTech sector, and there is much to lose if firms do not prioritise strategic guidance, purpose and diversity of all kinds.”

Board objectives and delivery on customer service and ESG

While the report finds that 66% of FinTech board members feel their firm’s purpose is embedded into their organisation, it also finds there is some misalignment between FinTech objectives and the delivery of those priorities.

Two-thirds (66%) of survey respondents cite customer engagement and service as a key priority, but only 19% believe they are delivering this effectively. While less stark, 78% of respondents rank ESG as an important priority, but only 64% believe current delivery is effective.

Strategic, long-term guidance from boards is key to effectiveness

The report finds that the majority of boards’ time should be spent focusing on strategic, forward-looking plans, while also carefully balancing the needs of investors and other stakeholders.

FinTech CEOs and Chairs surveyed indicated that the structure of the board is critical to delivering insightful guidance, and should comprise members with a diverse range of skills and experience.

Report recommendations to help FinTechs accelerate progress:

  • Appoint a dedicated Consumer Duty champion within the board – this must be a director who understands the regulatory requirements and the customer perspective
  • Create a strategic board-level focus on ‘purpose’ to positively influence activity, strengthen culture and attract customers and investors
  • Reset the tone from the top on diversity to promote broader thinking, widen perspectives, and achieve growth
  • Make AI a core business focus and a growth driver

“Since 2008, the FinTech sector has played a crucial role in democratising financial services. Today, 8 out of 10 adults in the UK are now using at least one FinTech tool on a regular basis,” says Janine Hirt, CEO at Innovate Finance.

“Nearly 60% of all SME lending done across the UK is being done by FinTechs, challenger banks, or alternative lenders and the UK boasts 10% of global FinTech market share. And despite a global downturn in investment, UK FinTech continues to attract more investment than all European countries combined.

“To ensure UK FinTech continues to grow from strength-to-strength, however, we believe it is important that startups begin to build effective boards from the beginning of their scaling journey, and continue to prioritise board effectiveness and diversity. This is one reason we are delighted to partner with EY on this important research confirming how critical FinTech boards are for sustainable growth.

“This unique report identifies what the best practices are for building and managing effective boards’ and includes insightful perspectives and recommendations from industry experts. With this report we hope to make a difference in the ecosystem and shed some light on board effectiveness to benefit FinTech businesses, their founders, investors and consumers to create a more inclusive and more transparent sector for all.”